Earnings results released by Taiwanese banks last year testify to their steady performance across key credit metrics and lend support to a stable outlook for the sector, Moody’s Investors Service said yesterday.
The operating environment remains broadly stable, the international ratings agency said.
Taiwanese banks’ loan growth averaged 5.1 percent last year, faster than 4.7 percent seen in 2017, driven mainly by corporate demand for working capital and mortgage loans, along with consumer lending for individuals, Moody’s said.
“We expect stable loan growth to hover around 5 percent this year based on our assumption that GDP growth would reach 2.2 percent,” it said.
Corporate loan demand would taper a bit but banks might increase their domestic loan books by strengthening consumer and mortgage lending as well as financing for small and medium-sized enterprises, it said.
Asset quality would hold benign with average impaired loan ratios falling to 0.9 percent last year, from 1.2 percent in 2017, it said.
Bad loan ratios could rise slightly this year due to weaker exports and economic growth, but the weakness would be limited in light of the private sector’s healthy balance sheets, it said.
The average return on assets for banks stood at 0.58 percent last year, little changed from 2017, it said.
Most banks maintained stable net interest margins and low credit costs even though weakening exports weighed on corporate profitability and cash flows.
Non-interest income gained importance in earnings contribution as it accounted for 39 percent of revenue for the banks, it said.
Moody’s expects local banks’ capitalization to remain stable this year amid subdued asset growth.
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